ad_answers

Ad_answers - For each of the following events first draw the initial SAS AD and LAS grafts then determine the effect of each scenario on either the

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
For each of the following events, first draw the initial SAS, AD and LAS grafts, then determine the effect of each scenario on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift up or down, or does the vertical portion of the LAS curve shift to the right or to the left?). Also determine the effect on the price level and the real output level. Express this graphically using the macro policy model. 1. The economy (macro equilibrium) is at potential or full employment output. Scenario: Households and businesses are now much less optimistic about the future state of the economy. ANS: The increase in optimism would increase household consumption spending (C) as well as increase business spending on new plant and equipment (I). Both C and I are components of aggregate expenditures (total spending). Since total spending has increased, the AD curve shifts to the right. If the shift in aggregate demand pushes the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 04/10/2008 for the course ECO 203 taught by Professor Reinauer during the Fall '07 term at Rollins.

Page1 / 4

Ad_answers - For each of the following events first draw the initial SAS AD and LAS grafts then determine the effect of each scenario on either the

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online